Arabica coffee futures soared to an all-time high on Monday, driven by concerns over potential supply disruptions triggered by a US tariff threat against Colombia. Futures contracts in New York surged as much as 0.9% during the day, marking a dramatic 80% rise from the same time last year. The rally reflects escalating fears over global coffee supply stability, particularly as major coffee-growing nations, including Brazil and Vietnam, face harvest shortfalls.

In Europe, arabica coffee futures continued their upward trajectory, adding 0.8% to reach $3.50 a pound in midday trading. At one point, prices briefly touched $3.56, setting a new record. These price movements come at a crucial time when coffee production has been strained by unfavourable weather conditions, particularly in South America.

The catalyst for the surge in futures came over the weekend when US President Donald Trump ordered his administration to impose a 25% tariff on Colombian goods, including coffee, as a response to the country’s refusal to allow two US military planes carrying deported migrants to land. The White House quickly clarified, however, that Trump would delay these sanctions after Colombia agreed to meet all of his conditions, including repatriating the migrants.

Despite the de-escalation of the immediate diplomatic tensions, the threat of tariffs on Colombia—a key coffee supplier—has left the market jittery. Colombia is the world’s third-largest coffee producer and the second-largest producer of arabica beans, which are in high demand for specialty brews. The US alone imports around 30% of its coffee from Colombia, making any disruption in supply potentially catastrophic for both producers and consumers.

The coffee market is already grappling with tight global supplies, exacerbated by disappointing harvests in major coffee-growing regions. In 2024, Brazil suffered its most severe drought in recorded history, severely affecting coffee yields. While rainfall returned later in the year, the damage had already been done, leaving coffee trees too weakened to produce a strong crop. The US Department of Agriculture (USDA) projects global coffee stockpiles for the 2024-25 season will hit a 25-year low, intensifying concerns over long-term supply.

These supply issues have already pushed prices to new heights, but the threat of US tariffs on Colombian coffee adds another layer of uncertainty. As the situation evolves, traders and market analysts are closely watching crop estimates and other developments, with key updates expected in the next 30 days. With the future of coffee supply hanging in the balance, the market remains volatile, and the ripple effects of these geopolitical tensions will likely continue to reverberate through the global coffee industry.